Morgan Stanley: U.S. Treasury yields are currently low, and the Fed's subsequent rate cuts may be smaller than market expectations

Morgan Stanley Investment Management stated in its outlook report that the current 10-year U.S. Treasury yield, close to 4%, may be too low relative to the U.S. economic outlook. The firm believes that economic growth in 2026 is facing increasingly favorable tailwinds. "Stronger growth combined with stubborn inflation is likely to result in the Federal Reserve cutting rates less than the current market pricing over the next 12 to 18 months." Against this backdrop, Morgan Stanley Investment Management adopts an underweight position on U.S. Treasuries.